Date: 2020
Type: Working Paper
An algorithm approach to FRAND contracts
Working Paper, EUI RSCAS, 2020/61, Florence School of Regulation, [Communications and Media]
PARCU, Pier Luigi, SILEI, David, An algorithm approach to FRAND contracts, EUI RSCAS, 2020/61, Florence School of Regulation, [Communications and Media] - https://hdl.handle.net/1814/68382
Retrieved from Cadmus, EUI Research Repository
In the context of standards development, the current mechanism of negotiation of FRAND royalties frequently brings to undesirable litigation. This is mainly due to the fact that a relevant part of the information concerning the standard, required to stipulate complete license contracts, is revealed only after the standard itself has spread in the market. In this respect, we propose a litigation-reducing algorithm to determine the FRAND level of the licensing royalty. Unlike the current negotiation mechanism, this algorithm can be defined ex-ante, so to increase contract completeness, because it includes a Bayesian-updating rule, able to address the presence of ex-ante uncertainty. We derive the algorithm from a generic oligopolistic-competition model, so to deliver characteristics of applicability to both price and quantity competition. Simulations in a linear-Cournot framework suggest the algorithm calculates FRAND royalties and may be usefully applied to real-life cases.
Cadmus permanent link: https://hdl.handle.net/1814/68382
ISSN: 1028-3625
Series/Number: EUI RSCAS; 2020/61; Florence School of Regulation; [Communications and Media]
Publisher: European University Institute